This article was published in the December 2018 issue of Indian Management Magazine.

]]>https://www.franchisebeacon.com/franchise-the-perfect-model-article/feed/0https://www.franchisebeacon.com/franchise-the-perfect-model-article/Government Shut Down Affects Business Lendinghttp://feedproxy.google.com/~r/FranchiseBeaconFranchiseExperts/~3/P3ZndvMBzMs/
https://www.franchisebeacon.com/government-shut-down-affects-business-lending/#respondTue, 22 Jan 2019 03:33:45 +0000https://www.franchisebeacon.com/?p=3340In the United States, many loans are in some way government backed or guaranteed. Small businesses receive SBA guaranteed start-up and working capital loans, service members receive VA backed home loans, and teachers receive down-payment assistance through the Teacher Next Door program. The fact is the government is in the lending business. Franchisee Funding Affected […]

Franchisee Funding Affected by Government Shutdown

What happens then, when the government shuts down? Taking all politics out of it, what is the effect for the small business owner?
SBA loans are a go-to source of franchisee funding, whether for start-up or working capital. The SBA does not provide the money but may insure up to 90% of any loss that a lending institution experiences from an SBA-backed loan. If the Small Business Administration where to no longer offer these programs, we would be having a different conversation. Lenders would find a way to become comfortable in a lending environment that did not provide such guarantees. However, with the assumption that the government will at some point resume normal operations, most loans that would normally be back by the SBA simply are not being processed.Mark Zandi, Chief Economist for Moody’s Analytics, recently stated that the government shut down his already stalled over $2 billion in small business loans.
Franchise Beacon is not here to tackle a $2 billion problem. If your franchisee funding is not affected by the government shutdown, this is strictly an academic question. If you have franchisees that were counting on that money for expansion, payroll, or other immediate cash flow needs, it’s an all-encompassing question.
If you’re in the former group, the Wall Street Journal did an interesting article about the effect of the shutdown, as did Inc. Magazine. You will likely find these articles very informative and will be better educated about how the SBA lending system works overall.
If, however, your system is being affected directly by a lack of available capital, whether due to the government shut down or otherwise, we’re here to help. Our unique franchisee funding program allows you to provide capital to your franchisees through a variety of different financial vehicles. These vehicles do not have government involvement, and your franchisees can use them for growth, emergencies, or any other reason.
If you are one of the real companies that are reflected in that $2 billion number, let’s talk! Using the links on the right-hand side of this page, give us a call, send an email, or schedule a consultation.

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https://www.franchisebeacon.com/calendar-for-brian-only/#respondWed, 16 Jan 2019 15:29:57 +0000https://www.franchisebeacon.com/?p=3028There is no excerpt because this is a protected post.

]]>https://www.franchisebeacon.com/calendar-for-brian-only/feed/0https://www.franchisebeacon.com/calendar-for-brian-only/5 questions to ask before you franchisehttp://feedproxy.google.com/~r/FranchiseBeaconFranchiseExperts/~3/MuU2aQth7fA/
https://www.franchisebeacon.com/5-questions-to-ask-before-you-franchise/#respondSat, 12 Jan 2019 06:47:45 +0000https://www.franchisebeacon.com/?p=28445 questions to ask before you franchise There are many Benefits to franchising your business. However, before go writing that FDD, wait! If you skipped the question of “Should I franchise”, you need to take a step back! These five questions will help you know if you should franchise your business. Is my business right […]

5 questions to ask before you franchise

There are many Benefits to franchising your business. However, before go writing that FDD, wait! If you skipped the question of “Should I franchise”, you need to take a step back! These five questions will help you know if you should franchise your business.

Is my business right for franchising?
An established, profitable business is the baseline requirement for franchising. However, having these three requirements in place do not guarantee that your business is right for franchising. If you have a successful business but tight margins, there might not be room for a royalty. If your business relies on your unique skillset combination, it may not be easy to replicate. Finally, if you are in a business that is extremely localized (NYC T-shirt store in Times Square) or seasonal, it may not make sense for franchising. By the way, a good franchise consultant can help walk you through a feasibility study to help make these determinations.

Am I right for franchising?
Franchising requires a complete change in what you are doing now. Instead of running your business, you will be a franchisor. Do you have the patience to deal with individuals who may want to change your model? Do you have the tenacity to push through rough patches, unhappy franchisees, litigation, and all the other hurdles that are part and parcel to this business? Do you have the wherewithal to say NO to a prospect that is really into your brand, but you know would be a bad fit? Even if saying yes would allow you to make payroll?

Is now the right time for me?
If you decide to franchise, it’s going to take over your life for a while. That might sound extreme but talk to any emerging franchisor and they will tell you that they are constantly thinking about the franchised business. Additionally, its expensive. Depending on your business model complexity and growth plans, you can anticipate laying out between $100K-$500K before your franchise is self-sufficient.

Is now the right time for my business?
Franchising WILL take your focus from your main business. The business you are franchising needs to be basically self-sufficient before you take the step into the franchise world.

Are their better options open to me?
Many franchise consultants, franchise attorneys, or other franchise professionals will tell you that franchising is “where its at!”. I think that goes back to “when you have a hammer everything looks like a nail”! There are other ways of expansion. Franchising, if successful, is likely the fastest way to a national footprint, but you are also giving up a lot of your profits, so you should at least consider expanding through corporate owned locations, or even doing both.

If you are having trouble knowing the “right” answer to some of these questions, you should bring in outside advice! Franchising is a tight community, and most people involved love to share information. Talk to franchisors, franchisees, franchise business consultants, and anyone else involved in the business. Connect with your local IFA chapter. Get plugged in and see if it feels like a world you want to spend the next 20 years in!

]]>https://www.franchisebeacon.com/5-questions-to-ask-before-you-franchise/feed/0https://www.franchisebeacon.com/5-questions-to-ask-before-you-franchise/Asset-Based Lending, an alternative to bank loanshttp://feedproxy.google.com/~r/FranchiseBeaconFranchiseExperts/~3/4hPZfX3Ka6o/
https://www.franchisebeacon.com/asset-based-lending-an-alternative-to-bank-loans/#respondFri, 11 Jan 2019 07:47:42 +0000https://www.franchisebeacon.com/?p=2834Where Did This Money Come From? When you first start looking for funding as a small business owner, the lack of options can surprising. After all, when you first opened your business, especially if it was a franchise, you probably had lenders ready to hand you funds at the drop of a hat. Then, you […]

]]>Where Did This Money Come From?
When you first start looking for funding as a small business owner, the lack of options can surprising. After all, when you first opened your business, especially if it was a franchise, you probably had lenders ready to hand you funds at the drop of a hat.
Then, you discovered the world of alternative financing! Suddenly what was amazingly underwhelming became surprisingly overwhelming. You began hearing terms like factoring, working capital advance, or equipment leasing.Perhaps, you also heard Asset-based lending. Asset-based lending, or ABL, is a line of credit given to a business which is secured by a specific set of collateral.

>Most Loans are Secured, Right?

ABL seems like a bit of a misnomer since, with very few exceptions, small business loans are collateralized. The difference is that with an asset-based line, the lender is looking at the realizable value of the liquidation of the assets used to secure the loan. Interestingly, unsecured loans often have a lien across the entire business, whereas asset-based lines typically are secured by the specific assets agreed upon.

Should You Use ABL?

Different types of lending work for different businesses. ABL funding is no different: it works for businesses that have fairly significant equity in hard assets, and either are not quite at the point of bank financing, have exhausted their bank lines, or desire to hold their bank lines open for day-to-day capital needs. Very young, start-up businesses typically will not be able to secure an ABL line. In the franchising space, ABL is typically going to be more geared towards the franchisor than the franchisee.
If you are business with credit history, hard assets such as inventory, equipment, or real estate, and you have the opportunity to use new funds to grow your business, ABL should definitely be something you’re considering.

]]>https://www.franchisebeacon.com/asset-based-lending-an-alternative-to-bank-loans/feed/0https://www.franchisebeacon.com/asset-based-lending-an-alternative-to-bank-loans/Working with Franchise Brokers and Coacheshttp://feedproxy.google.com/~r/FranchiseBeaconFranchiseExperts/~3/bzbtZezoRIw/
https://www.franchisebeacon.com/working-with-franchise-brokers-and-coaches/#respondFri, 11 Jan 2019 06:55:39 +0000https://www.franchisebeacon.com/?p=2828Why working with franchise brokers makes sense I went to the Franchise Broker’s Association Annual Convention some time ago. Afterwards, I was in the Houston United Club on a layover, and I had a call with one of my franchisor clients. He was shocked to learn that we were working with franchise brokers. “They are […]

]]>Why working with franchise brokers makes sense
I went to the Franchise Broker’s Association Annual Convention some time ago. Afterwards, I was in the Houston United Club on a layover, and I had a call with one of my franchisor clients. He was shocked to learn that we were working with franchise brokers. “They are so expensive! Why should they get $20,000 just for a lead?”
The commissions paid to brokers “just for a lead” are surprising to many would-be or brand new franchisors. For some reason the franchise broker/zor relationship can become occasionally adversarial. I have never understood this. To franchisors; franchise brokers are out there building YOUR brand. You are NOT paying them for just a lead; you are paying them because they are your brand ambassadors.
Below is an excerpt from my book How and Why to Franchise Your Business that addresses the coach/zor relationship.

Brokers, coaches, consultants-they are known by many names. Basically, franchise brokers are responsible for generating their own leads, and they refer interested parties to franchisors.
I have heard it said that brokers just bring you leads that you would already get elsewhere. I can tell you that I have worked with franchise budgets in excess of $100K a month in lead procurement. I currently manage a budget close to $1mil/year, and in all my years of franchise development, I have only had one lead come through a broker and another franchise lead source.
If you chose to work with brokers, and I think most franchisors should, then you need to learn how. This is not a set-it-and-forget-it model, though it is often treated as such. It’s important to understand that most broker networks have several hundred franchisors in their portfolio, but most individual brokers have between 10-20 go-to concepts. To make it on this “short list,” the individual broker has to have a basic understanding of your concept, believe in it, and, most importantly, believe in your ability to get deals done. I recommend that, once you list with a broker network, you get in touch with as many of their individual brokers as you can. Share your passion with them. Learn about them. Find out how they are generating leads. Let them know whom they should be sending to you, and whom they shouldn’t. Most importantly, establish a relationship and maintain it. I also recommend that you invite the brokers to participate in your sales process for the first candidate they bring to you. This will give them a deeper understanding of your concept, and make them more likely to show your brand to their potential candidates.
Again, I am often shocked when I speak to the executives of some of the largest networks in the country, and they lament how hard it is to get the franchisors to engage with their coaches. The requisite investment in most of these networks will not pay dividends if you don’t engage.
Brokers are a lot of work, but in my opinion, they are worth it.

Conduct a feasibility study to evaluate scalability, national demand, and profit for franchisees.

Make sure you have the time and money

Be prepared to take a step back from your current business, and anticipate an investment of between $100K-$400k.

Surround yourself with professionals

At the start-up phase, at a minimum you will need an expert franchise sales person, Operations Manager, Training Manager, and a franchise attorney. Keep in mind that the, if you have a well-rounded franchise expert on board, they may be able to wear many hats (such Training, Support, and Operations). Another option is enlisting a franchise consulting company; often you will get a full team for less than a single executive salary.

Document everything

From the time the lights go on until they go off, every step of your business including marketing, employee management, product merchandising; everything you can think of should be put into a process guide. This will later become your Operations Manual. Again, a good franchise consultant or Operations Consultant can help you with this.

Determine the offering

Decide how much control you require on your look and feel, what your involvement will be in the supply chain, your fee structure, etc. This is the most complicated part of becoming a franchisor.

Develop a growth plan

Evaluate if local, regional, or national growth is the right initial approach and how many new owners can you support in a month.

Develop a marketing budget

Use your growth plan to develop a budget. This will typically include franchise brokers, franchise portals, exhibitions, as well as organic and paid web traffic.

Create a comprehensive, defined mutual evaluation process

Design your training, onboarding, and support processes

Execute

Be careful! Your first 2-3 franchisees will set the tone of your system for years to come.

]]>https://www.franchisebeacon.com/10-steps-to-becoming-a-franchisor/feed/0https://www.franchisebeacon.com/10-steps-to-becoming-a-franchisor/Validation, the Key to Successful Franchisee Recruitmenthttp://feedproxy.google.com/~r/FranchiseBeaconFranchiseExperts/~3/6PB9lnMUVFA/
https://www.franchisebeacon.com/validation-the-key-to-successful-franchisee-recruitment/#respondMon, 07 Jan 2019 08:41:13 +0000https://www.franchisebeacon.com/?p=2629franchisee Recruitment Validation is something you should be thinking about even if you are just now considering how to franchise a business. You might think that you are responsible for selling your franchise, or that you employ the people responsible for selling your franchise, but that is simply not true. The people that impact your […]

]]>franchisee Recruitment
Validation is something you should be thinking about even if you are just now considering how to franchise a business. You might think that you are responsible for selling your franchise, or that you employ the people responsible for selling your franchise, but that is simply not true. The people that impact your franchisee recruitment the most are not your salespeople, they are your existing franchisees. They are your salespeople. If they are happy, you will sell franchises, and if they aren’t, you won’t.
Sure, there will always be one or two people out there who you can “talk into” buying a franchise, because the concept you have happens to be what they have dreamed about their whole life, but most people make their investment decision based largely on what they hear from the franchise network.
Validation is even more important to a start-up franchise than it is to a mature franchise. When you have 100-200 locations or more open, and 2-3 franchisees that are unhappy, the impact is not nearly as damaging as if you only had 5-10 franchises open with 2-3 that were not happy with the system. Furthermore, a start-up typically will not have any name recognition to lend it credibility; the only credibility is what comes from the franchise network.
Of course, most franchisors know that validation is important; they just don’t know what to do about it or even if they have great or poor validation. There are a few key steps a franchisor can take, however, to measure validation, find out what is helping and hindering it, and quickly improve their system-wide validation with minimal investment.
Please note that there is one killer for validation that we cannot help; an unprofitable model. If your franchise model does not allow for franchisees to make money, then stop selling and fix it.

Step One- Measuring Validation

Before you can address franchisee validation issues, you need to learn what they are and how rampant they may be throughout your system. You may think that this is as simple as talking to your support personnel and finding out what the key franchise complaints are, but unfortunately it’s just not that easy. You see, when some franchisees is talking to their franchisor, they often feel at a disadvantage and that they have to exaggerate problems to get help. Other franchisees may not want their franchisor to know they are struggling, or may not want to admit they need help, so they may sugar-coat things. Conversely, when some franchisees are talking to prospects, they may feel their ego is on the line and talk about how great they do, they may feel loyalty to the franchisor so put the best shine on things, or they may be concerned that the prospect might compete against them, so they might try to talk the prospect out of buying. Basically, often what your franchisees tell you and what they tell prospects is two different things.
So what’s the solution? How do you find out what franchisees are telling prospects? It’s simple; become a prospect! Call your franchisees as though you are considering buying your own franchise. Ask specific questions. Questions like

What was your total initial investment?

Have your sales and profits met your expectations?

Knowing what you know now, would you make the investment again?

Asking these and other, similar questions will give you a true insight not only into how your franchisees validate, but also any upcoming problems in your system. Make sure you also ask questions to find out what makes the happy franchisees happy. Try to get in touch with every franchisee in the system. Don’t use cell numbers or other personal information, though. Only use information available to your prospects, like information from the FDD and your website. Click here to learn how Franchise Beacon can provide this service for you.

Step Two-Triage

There is a saying in franchising: There are two types of franchisees; franchisees that succeed because of their own efforts, and don’t succeed because of corporate. In other words, typically franchisees take credit for their successes and lay blame for their failures. Most likely, after you finish these calls, you will have a laundry-list of good and bad observations from your network. Now, you need to triage them. If franchisee says that the franchisor sends too many emails, or a certain person in corporate isn’t responsive, that is not quite as important as if they say no one ever answers the phone at corporate, or the technology system is horrible, etc. Once you have a succinct list of complaints, go though them and look for the complaints that:

Are repeated consistently

Could potentially stop someone from investing

Are solvable

Narrowing the list down to (hopefully) 2-3 issues that fall within this scope, and put together a plan of action to solve them.

Step Three- Communicate

Rather than wait until you solve the issue before you improve validation, communicate right away to franchisees that you know the issue exists, and your plan to solve it. Give them a detailed plan, with target dates and milestones. Simply knowing that you are aware of the issues and working towards a resolution can turn validation around.

Step Four- Solve

Take the plan of action that you put designed in step two, and execute on it. Read more about how Franchise Beacon can help you with this step

Step Five- Keep Communicating

People get used to being upset about the same things. Sometimes, they get so used to this that they don’t notice when the problem is fixed. Make sure that you are communicating your progress to your network, and let them know when you feel problems are solved. Invite their feedback.

Step Six- Target The Upset Franchisees

Reach out to the franchisees that were the most vocal or the most upset about a specific issue, and talk to them about the solution you implemented. Ask for their thoughts and feedback. Find out if they feel the solution is adequate. Invite them to be involved in finding solutions in the future.

Step Seven- Repeat

Every 12 to 18 months, repeat this process. This will help you keep validation under control, and also keep your finger on the pulse of your network in a way that that no other process can.

]]>https://www.franchisebeacon.com/validation-the-key-to-successful-franchisee-recruitment/feed/0https://www.franchisebeacon.com/validation-the-key-to-successful-franchisee-recruitment/Funding the B2B Spacehttp://feedproxy.google.com/~r/FranchiseBeaconFranchiseExperts/~3/rbOzeXJwa9M/
https://www.franchisebeacon.com/funding-the-b2b-space/#respondMon, 07 Jan 2019 04:25:20 +0000https://www.franchisebeacon.com/?p=2548The B2B franchise space has a tendency to be high margin, attract top-notch franchisees with strong sales and/or executive backgrounds, and enjoys a long history of success. Of course, as a franchisor in this space, you already know that. You also know the other side of the coin; that a service-based B2B franchisee can quickly […]

]]>The B2B franchise space has a tendency to be high margin, attract top-notch franchisees with strong sales and/or executive backgrounds, and enjoys a long history of success. Of course, as a franchisor in this space, you already know that. You also know the other side of the coin; that a service-based B2B franchisee can quickly get bogged down with receivables. What’s more, the more successful the franchisee is in the early days, the more they get tied to their AR, hampered by cash-flow, spending time on collections instead of selling, and likely becoming discouraged because their success is breeding frustrations instead of profits.

Sound familiar? Do you feel like you should bring a solution to your franchisees, but not sure what that solution is? Perhaps we can help!

Because we come from both the franchising and funding world, we both understand the frustration and understand the solution.

With the solution we bring to the table, we arrange for the funding, but it comes from you. By using a white-label product it is you, the franchisor, who is bringing the solution. You are the one that is allowing your franchisees to grow instead of being shackled to AR. You are the one getting your franchisee past that growth wall and into the next stage of their business.

As a serendipitous benefit, all AR funds now run through you, to your franchisee, allowing you the chance to take your royalties, ad funds, and other fees prior to passing the remaining through. So not only are you eliminating a headache for your franchisees, you are eliminating one of the biggest headaches for franchisors!

]]>https://www.franchisebeacon.com/funding-the-b2b-space/feed/0https://www.franchisebeacon.com/funding-the-b2b-space/Five things to consider before franchising your businesshttp://feedproxy.google.com/~r/FranchiseBeaconFranchiseExperts/~3/xvW11GiMJms/
https://www.franchisebeacon.com/five-things-to-consider-before-franchising-your-business/#respondSun, 06 Jan 2019 08:54:11 +0000https://www.franchisebeacon.com/?p=2505The post Five things to consider before franchising your business appeared first on Franchise Beacon.
]]>Red pencil and questionnaire

Are you wondering how to franchise a business? Are you wondering if franchising your business is the right decision for you? Then here are five things you should consider!

Do you have a proven concept?

You are asking people to invest in your concept, so you better have proven it. If you have an “idea” you want to franchise, go prove it first. Do the business that you want to franchise, for at least a year, before you try to franchise it.

Can your business model sustain a royalty?

Some businesses operate on low margins, and that’s ok! If you have a business that does $500K in revenue a year, and you bring 10% ($50,000) to the bottom line, and it doesn’t take up all your time, then a lot of people consider that a good business. However, if you were to franchise it, a franchisee doing the exact same numbers, but having to pay a 5% royalty back to corporate, would only be making 5%, or $25,000, to the bottom line. That’s not nearly as attractive.

Is your business scaleable?

Even if you have a proven, high margin concept, you still might not want to franchise. If there is something unique about you or it, it is still not fit for franchising. If you have a successful surf shop, which requires proximity to the ocean to succeed, you might be better served opening a couple of corporate stores. The same would apply to a ski and snowboard store, a boat cleaning business, or any other business that relies on proximity to the ocean, snow, desert, etc. Additionally, if it took you years to master your craft, or if you feel like you got lucky that your business model works, it probably isn’t right for franchising.

Are you ready for a career change?

Think about what you do today. Maybe you run a retail business, help people travel, provide a cleaning service, or work on motorcycles. Whatever it is, if you are considering franchising, you will no longer do what you do today; you will be a franchisor. When you become a franchisor, your current job becomes secondary to running your franchise, or you may have to completely quit what you are doing today. Even if you have a profitable, scaleable business model, and extra capital available to franchise, if what you do today is your “dream job”, don’t screw it up by becoming a franchisor.

Are you prepared to make the investment?

Becoming a franchisor is not cheap, and it is not a do-it-yourself project. Becoming a franchisor requires investment in legal fees, consulting fees, technology development, marketing and advertising collateral, and lead generation. Typically, you are going to need at least $200-$300K to start your franchise, including working capital.